Miran reiterated that the trade tensions with China make interest rate cuts “more urgent” now, even if the Xi Jinping administration’s export control threats do not materialize.
Federal Reserve Governor Stephen Miran on Thursday reportedly stated that the U.S. is “probably” set for three 25 basis point rate cuts in 2025.
In an interview with Fox Business, Miran reiterated that the trade tensions with China make interest rate cuts “more urgent” now, even if the Xi Jinping administration’s export control threats do not materialize.
“If monetary policy stays as restrictive as it is, and you have a shock like this hit the economy, it does materially increase the negative consequences of that shock,” Miran said in the interview.
The Fed official added that he favors a 50 bps rate cut this month, while noting that the U.S.-China trade tensions have created “new tail risks” for the United States economy.
“I think that we are probably set up for three 25-basis-point cuts this year,” he added. According to minutes from September’s Federal Open Market Committee (FOMC) meeting, of the 19 Fed officials, there was a slim majority of 10-9 in favor of two 25-bps cuts in the FOMC’s October and December meetings.
On Wednesday, Miran said that the downside risks to the U.S. economy had increased due to China’s rare earth export controls. “There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognize that should get reflected in policy,” he stated.
According to data from the CME FedWatch tool, there is a 97.8% probability of a 25 bps interest rate cut this month.
Meanwhile, U.S. equities rose in Thursday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.28%, the Invesco QQQ Trust ETF (QQQ) surged 0.43%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.08%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.14% at the time of writing.
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